Liability in negligence

Focus: Liability in negligence pertaining to economic loss and psychiatric injury.
Objectives: After reading the chapter, you should be able to:
- Understand liability for pure economic loss due to negligent acts and misstatements.
- Understand liability for psychiatric injury sustained by primary and secondary victims.

Claimant Rights: If a claimant can prove a negligent act or omission by a defendant, they can claim damages for:
- Physical injury.
- Damage to property.
Example of Claim: In a scenario where a defendant causes a car accident through negligent driving, thereby injuring the claimant and damaging their vehicle:
- The claimant can claim for medical expenses and vehicle repair/replacement.
- Damages can also cover consequential economic losses (e.g., hiring a replacement vehicle, lost earnings).

Definition: Pure economic loss is financial loss that is not the result of physical injury or damage (e.g., lost profits while a business cannot operate).
General Rule: Claimants cannot recover for pure economic losses due to negligence; this issue is generally considered more relevant under contract law.

Negligent Misstatements: Claimants can recover for pure economic loss if:
- The loss results from reliance on a negligent misstatement.
- A 'special relationship' exists between the claimant and defendant.

Spartan Steel v Martin and Co. (Contractors) Ltd (1973):
- An electric cable cut by the defendant caused loss of power to a factory. The claim contained three parts:
1. Damage to the melts in production - recoverable due to physical damage.
2. Lost profit on the destroyed melts - considered consequential loss and thus recoverable.
3. Lost profit during downtime - deemed pure economic loss and not recoverable, as per Court of Appeal's decision.
Weller v Foot and Mouth Disease Research Institute (1966):
- Negligence allowed foot and mouth disease to escape, impacting an auctioneer's revenue. The claim was rejected as the losses were classified as pure economic loss.
D Pride and Partners v Institute for Animal Health (2009):
- Farmers' claims for economic damages due to animal movement restrictions were rejected, reinforcing the exclusionary rule for pure economic loss.

Two-Party Liability: Where A gives negligent advice to B, who suffers losses from relying on it.
- If A and B are in a contract (e.g., professional advice for a fee), B may recover under breach of contract.
- If no contractual relationship exists, B must establish whether A owed a duty of care.
Three-Party Liability: A communicates a statement to B, who relays it to C, causing C to suffer loss.
- The question arises if A owes a duty of care to C.

Candler v Crane Christmas and Co. (1951): Established that a duty of care could extend to third parties relying on statements, including intending investors.
Hedley Byrne v Heller and Partners (1964):
- The key case for establishing the ability to claim for negligent misstatements if a 'special relationship' is shown.
- Key Context: Hedley Byrne took reliance on a bank's reference for credit which led to financial loss when the referenced company liquidated.
- House of Lords allowed claims for negligent misstatements under proof of special relationship, yet Hedley Byrne lost due to the disclaimer included in the reference.
Caparo Industries v Dickman (1990): Defined the elements of a special relationship:
1. Possession of specialist skill or knowledge
2. Claimant relied on the advice
3. Advice communicated directly and with knowledge of purpose
4. No disclaimers present.

Chaudhry v Prabhakar (1988): A friend provided negligent car purchase advice, establishing that such statements—even in informal settings—can create liability.

Psychiatric Injury: Also referred to as nervous shock, it signifies severe, long-term mental injury extending beyond ordinary shock or grief.

Primary Victims: Directly involved in an accident; they can claim for physical and/or mental injury without stringent criteria.
Secondary Victims: Witnesses to the accident or its aftermath. Their claims face stricter limitations (the Alcock criteria).

A negligent accident must have occurred.
The victim must demonstrate measurable mental injury.
The claimant must satisfy the Alcock criteria:
- Close ties of love and affection with the primary victim.
- The shock experienced occurred at the accident scene or its immediate aftermath.
- The shock must be experienced through one’s senses, not through hearsay or media.
- The injury must be one that a person of reasonable fortitude would similarly suffer.

Dulieu v White (1901): Established foreseeability of personal danger as grounds for a claim of nervous shock.
Hambrook v Stokes (1925): Recognized the right to claim for fear concerning family safety.
Bourhill v Young (1943): The claim was denied as the claimant was not in the immediate vicinity nor related to the victims.
McLoughlin v O'Brien (1982): Expanded definitions of close ties; shock could be suffered in the immediate aftermath even if not at the precise accident scene.

Page v Smith (1995): Clarified the threshold showing for psychiatric injury concerns, stressing the relevance of the claimant's perceived risks associated with personal injury.
Alcock v Chief Constable of South Yorkshire (1992): Established that claimants must demonstrate close ties of affection and suffer shock personally.
Chadwick v British Rail (1967): Recognized rescuers as primary victims, facilitating claims for nervous shock when they assist during accidents.

Bystanders: Uninvolved witnesses cannot claim unless they meet the Alcock criteria (as demonstrated in McFarlane v E E Caledonia (1994)).
Near Missers: Close to the accident scene and can claim if negligence is proven.

Property Owners: Can claim if they suffer psychiatric shock due to witnessing the destruction of their property (as established in Attia v British Gas (1987)).
Developments in Gradual Shock: Courts have held that claims for long-term deterioration, such as in Sion v Hampstead Health Authority (1994), may not qualify, while rapid decline such as in North Glamorgan NHS Trust v Walters (2002) may be actionable.

Pure Economic Loss: Generally not recoverable unless related to negligent misstatements.
Psychiatric Injury: Claims differentiated between primary and secondary victims; the latter must satisfy stringent criteria (the Alcock criteria).
Negligent Misstatement: Requires evidence of a special relationship and negligence on statement.
Rescuers vs. Bystanders: Rescuers can claim, while bystanders must clear the Alcock criteria.
Psychiatric Injuries: Must be assessed through the lens of quick, observable trauma rather than extended periods of distress.